In many countries around the world this past year, governments, including the government of the United States, have been put on trial. A common verdict, at the poles, has been “guilty”. But what are they guilty of?
The Trial
The political expression of the guilty verdict appears to condemn western liberal democracy to the dustbin, in favor of nationalist conservative populism. To paraphrase – “Give me a strong man who will dismantle the status quo, close the borders and return control of the country to ‘us’ rather than the atheist globalist socialists that are making all the decisions.” These changes, it is claimed, will result in an economic resurgence and restore national unity and strength. Those who have felt left behind by the social, geopolitical and economic changes in recent decades are reassured by these promises and they voted in mass.
The accusations, and the verdict, are understandable. There have been many significant and complex changes in the last 50 years. Our populations have increased, as has the mobility of those populations. Travel, technology and communication have enabled increasing flows of visitors and migrants, many drawn to the increases in wealth and opportunity that trade and technology have produced. This has been welcomed by some, but disruptive for many. Jobs and industries have, indeed, been lost in many communities.[1]
Cultural change has also accelerated, as the new networks of social interactions through art, music, entertainment, information exchange and conversation exploded with the rapid proliferation of almost cost-free outlets of expression. For those of us alive 50 years ago, the world of media and entertainment is completely unrecognizable. The resulting cacophony of voices feels incomprehensible and jarring. Easier to tune it out, or to tune in only those voices that feel comfortable – the ones that make us feel heard.
At the same time, new people and new voices have also brought in new ideas. Among these has been an acceptance, even a celebration, of differences. Energized by longstanding principles of freedom and liberty, these changes were exciting and welcomed by many. Yet the apparent dissolution of what had seemed, to many, to be inviolable cultural norms over a period of mere decades, resulted in severe distress and resentment in some communities.
What’s Missing From this Narrative?
Perhaps these issues all could have been overcome, had the political conversations not derailed into polemics and posturing. But there also was one economic factor that quietly evolved over the last 50 years that I believe is the most significant underlying cause of the disaffection of large swaths of the global public. Quite simply, the working poor and middle classes in countries around the world have been badly hurt economically. Growing wealth and income inequality has quietly and inexorably made life harder for much of the global population, including the population in the US.
A recent report on the status of inequality within the US[2] makes this abundantly clear.
“The wealthiest cities in the U.S. are now almost seven times richer than the poorest regions, a disparity that has almost doubled since 1960. Meanwhile, especially in urban coastal areas, wealth has become highly concentrated in the hands of a few.”
The author also points out that he does not see how the policies espoused by the new President are going to alter this trend – and, in fact the trend may grow worse.
Some economists have been highlighting the growing inequality of wealth and incomes for some time.[3] While these conversations have been intense and public, a clear consensus among economists on the causes and consequences of this inequality has not emerged, and policymakers seem to have been largely absent from the conversation. A speaker at a recent UN Seminar posed the question: “Thirty years after the ‘Washington Consensus’, is there a new policy consensus that addresses the problem of inequality?” His oblique answer – “There is widespread acceptance that multiple, interrelated, and mutually reinforcing inequalities exist and that these inequalities are generally “too high”.[4]
The Washington Consensus is described in Wikipedia as is a set of ten economic policy prescriptions considered in the 1980s and 1990s to constitute the “standard” reform package promoted for crisis-wracked developing countries by the Washington, D.C.-based institutions the International Monetary Fund (IMF), World Bank and United States Department of the Treasury … The prescriptions encompassed free-market promoting policies such as trade liberalization, privatization and finance liberalization. They also entailed fiscal and monetary policies intended to minimize fiscal deficits and minimize inflation, sometimes referred to as “austerity”. Austerity for whom?
Who do you Blame?
The economic policies in the US, and now much of the world, reflect the free market and frugal government orientation of the Washington consensus. It has been consensus economic policy for almost 50 years, through both Democratic and Republican leadership, and it has been promoted by US-led institutions around the world. Over this same period, inequality has soared. The wealthy have gotten much wealthier, while the working poor and middle class have fallen behind.
Don’t blame the victim. The angry calls for change in the status quo are valid and legitimate. The consequences of this system of financial market philosophy and operation has been unfair. The success of populists in channeling that anger into victory at the polls is very unfortunate but understandable.
Rather, we need to focus on pointing out the reality – unfettered (or under-regulated) free market capitalism has been very, very good for wealth accumulation by a very, very small community. That success has, in return, generated immense support financially for politicians to promote government policies supporting and protecting wealth. These trends have also, however, resulted in significant hardships, in the US and globally, for those without privilege or power. As long as the US and other governments do not assert independent leadership in economic policy based on the public good, rather than the good of the owners in private markets, the situation is not likely to change.
Conclusion
Significant reform of this system does not appear likely in the near future. But I can predict that those who are economically disadvantage by this system will continue to be angry, and to get angrier, in the decades ahead. I hope this will create an opportunity for those interested in promoting economic liberty and equality to rebuild bridges with the workers that contribute their labor to our economic enterprise. The mutual goal should be a rebalancing of the sharing of the rewards of economic growth between capital and labor. The alliance between workers and “liberals” that flowered a century ago produced some of the most significant economic reforms this country has ever seen. Those 20th century reforms implemented a rebalancing that helped pull the US out of the depression and improved the well-being of the least fortunate in our society. Many of those programs, in one form or other, were institutionalized and continue to play an important role in providing economic security and reducing poverty. Perhaps we will do this again in the 21st century.
[1] Rural Americas Economies are often Left out By a Design Flaw in Federal funding, by Tom O-Brien and Tim Freeman, in The Conversation, January 13, 2025.
[2] Soaring wealth inequality has remade the map of American prosperity, by Tom Kemeny. Published: January 16, 2025, in The Conversation:
[3] See, e.g.: Thomas Piketty, Capital in the Twenty-First Century (2013)
[4] February 1, 2024: UN DESA DISD Webinar On “Is There A ‘New Consensus’ On Inequality?” by Fransisco Fererra.
